Normally I do my own tax return using TurboTax.
As part of the process I usually have it login to my bank and stock accounts to get electronic copies of my 1099’s etc.
This year, due to a one-time complexity, I will probably have a CPA prepare my return.
How does one send them an electronic 1099 (not just a pdf) or allow them to access it without just providing a username/password – which seems a bit risky?
I see online that some people say you can get a bank to provide a read only account. But even that provides more info than they need.
How does one send them an electronic 1099 (not just a pdf) or allow them to access it without just providing a username/password – which seems a bit risky?
Most have a secure vault to upload documents.
If that isn’t available, they may be able to handle 7Zip encrypted files. Password can be provided separately or by combining and referencing information the CPA would have: part of your Social, Zip Code, Address, or other information
How does one send them an electronic 1099 (not just a pdf)
Why would a PDF not be good enough? 1099s don’t get filed with your return, so there’s no need for the tax preparer to get an electronic copy. A PDF should be just fine for your tax preparer. Ask them how they want to get it - paper copy, secure upload or something else.
“Why would a PDF not be good enough? 1099s don’t get filed with your return”
They are good enough for me. I normally summarize and then list the brokerage account. Example: Broker xx1234 has $y in long term gains, basis, and proceeds on Form 8949 and Sch. D.
Because then they would have to copy all the info by hand, potentially making a mistake, taking longer and charging more.
I guess what I was asking, indirectly, was is there a way for the CPA to get the data inserted into whatever software they use the same way I do it in TurboTax…but without needing to give them by login info.
I can just printout the PDFs and drop them off … that is easy.
Most tax professionals don’t use direct import from third party websites because negotiating the security protocols are too time consuming for a one-off use. What is more likely is that either they have low-cost administrative help to input the data or they use might use a service. For instance, Drake Software, (which I use), has a service, Gruntworx. You send them a scanned file containing all of the source documents for a tax return. It returns the file with the documents sorted, categorized, bookmarked, and all the relevant data in an import ready file. Gruntworx claims that it works with many of the other professional grade software programs.
Because then they would have to copy all the info by hand, potentially making a mistake, taking longer and charging more.
As someone who resists automating data entry as a working professional, my reasoning is simple.
When I enter the data by hand, it runs through my brain. Significant amounts register there, so that when I go to review the return, I know what to expect. Even more, I learn what is going on and where there might be room for better tax planning.
If W-2 data entry were automated, I wouldn’t know if you were making 401k contributions or not. I’d have to dig out the W-2 again and look at it. Or if you were paying for health insurance with pre-tax money (generally a good idea).
I wouldn’t know what stocks or mutual funds you were invested in, and what dividends and/or capital gains they produced. So I couldn’t talk intelligently about your financial plans and how they mesh with tax planning.
I wouldn’t know the balance on your mortgage(s), so I couldn’t tell if you have a competitive interest rate and whether a refinance might make sense.
For older folks, I wouldn’t know what charities you contribute to or how much you like to contribute to each charity. So I wouldn’t know if it makes sense to consider direct contributions from your IRA.
I learn an awful lot when entering the data by hand. It helps me be more than a monkey typing info into a black box that spits out a tax return. It also helps that I’m a touch typist and 10 key operator, so I make very few data entry mistakes. And never any that are significant because I know how to check my work.
I could do more returns (and therefore make more money) if I farmed out tax data entry. But that’s not the type of return I want to do. I want to do returns for people who also want tax and financial advice - or at least intelligent discussion.
When I enter the data by hand, it runs through my brain.
It’s the same for me when I do data entry in the data-handling world in which I exist. I know what I’m actually doing, not just punching keys.
The concept works in a broad range of venues, too. The cruise control on my car works down to 30mph, but especially when I’m city-driving, even on thoroughfares, I drive by hand. I want to stay engaged with the traffic around me, not have my brain on cruise control, too.
Automation is pretty slick and often useful. But only in its place.
…I guess what I was asking, indirectly, was is there a way for the CPA to get the data inserted into whatever software they use the same way I do it in TurboTax…but without needing to give them by login info…
For several years, I’ve used TurboTax (TT) Deluxe to download 1099 data that is directly usable by TT, and presumably other tax preparation software. This access is to the 1099 data only, not to any account. If my memory serves, access requires SSN and account number only, at least for my clearing house. My brokerage provided help on this process in Frequently Asked Questions (FAQ).
Many clearing houses (not the brokerages, but the clearing houses that hold securities for the brokerages) provide this downloadable 1099 data. Supposedly, this is the data that is used to prepare PDF and other versions of 1099s. When you point TT to the clearing house that has your data from a long list of clearing houses, TT connects to the appropriate source and downloads the data.
For several years, I’ve used TurboTax (TT) Deluxe to download 1099 data that is directly usable by TT, and presumably other tax preparation software. This access is to the 1099 data only, not to any account. If my memory serves, access requires SSN and account number only, at least for my clearing house. My brokerage provided help on this process in Frequently Asked Questions (FAQ).
Many clearing houses (not the brokerages, but the clearing houses that hold securities for the brokerages) provide this downloadable 1099 data. Supposedly, this is the data that is used to prepare PDF and other versions of 1099s. When you point TT to the clearing house that has your data from a long list of clearing houses, TT connects to the appropriate source and downloads the data.
As I understand it, there is only one clearing house, the Depository Trust and Clearing Corporation (DTCC), that is the clearing house for all stock and bond transactions in the US. The stocks themselves are all registered in the name of Cede & Company, that is therefore the actual owner of those stocks. (This does not apply to people who have physical possession of their stock certificates. Not all corporations issue physical stock certificates anymore.)
As I understand it, there is only one clearing house, the Depository Trust and Clearing Corporation (DTCC), that is the clearing house for all stock and bond transactions in the US. The stocks themselves are all registered in the name of Cede & Company, that is therefore the actual owner of those stocks. (This does not apply to people who have physical possession of their stock certificates. Not all corporations issue physical stock certificates anymore.)
It appears that my mention of “clearing house” is not accurate, but I think that if you ignore all such mentions and assume that the functions I attached to that term are either performed by your broker or a business partner hired to perform certain required functions, all will turn out well. Simply follow instructions from your broker on how to download 1099 data to TurboTax, et. al.
A company called Apex Clearing (apexclearing.com) performs these functions for my broker, but I have no knowledge of how this arrangement came about or how widespread this arrangement is. I assume that it is simply offloading a function of stock tracking and compliance that is best handled by a specialized firm, at least for some brokerages. I should mention that I don’t have any 2-way communication with Apex Clearing - all communication is through my broker.
Here is my original message edited to eliminate any confusion about “clearing houses:”
For several years, I’ve used TurboTax (TT) Deluxe to download 1099 data that is directly usable by TT, and presumably other tax preparation software. This access is to the 1099 data only, not to any other account information. If my memory serves, access requires SSN and account number only. My brokerage provided help on this process in Frequently Asked Questions (FAQ).
Many brokerages provide this downloadable 1099 data, based upon the long list that I have to choose from. When you point TT to my brokerage, TT connects to the appropriate source and downloads the data.